A measurable decline in the value of the Canadian dollar against its United States counterpart was documented on Wednesday, February 11, 2026, as the greenback benefited from broad-based gains and domestic data revealed a deepening downturn within Canada’s services sector. The loonie was observed trading 0.2% lower at 1.3670 per U.S. dollar, oscillating within a technical range of 1.3629 to 1.3684. This downward trajectory is understood to be driven primarily by a shift in market positioning and a technical correction following a sustained period of Canadian dollar strength. It has been noted by market strategists that momentum indicators are beginning to pivot, suggesting that the USD-CAD pair may have further room for appreciation, with potential targets identified at the 1.3750-60 level should the current resistance at 1.37 be breached.
The current shift in currency valuation is occurring simultaneously with a significant adjustment in speculative sentiment. According to recent data from the U.S. Commodity Futures Trading Commission, bearish bets against the Canadian dollar have been slashed to their lowest levels in nearly two years. This reduction in “short” positions suggests that the market had become overly optimistic regarding the loonie’s resilience, leaving it vulnerable to the current technical reversal. The greenback’s resurgence, meanwhile, is being fueled by the continued market assessment of the U.S. Federal Reserve’s future leadership, with the selection of Kevin Warsh as the next chair providing a steady tailwind for the American currency.
The domestic economic backdrop in Canada has added to the pressure on the currency. The services economy was reported to have contracted for a third consecutive month in January, as documented by the S&P Global Canada Services PMI data. The headline Business Activity Index fell to 45.8 last month from 46.5 in December, a decline that is largely attributed to heightened trade uncertainty. This contraction in activity and new business highlights a growing fragility in the non-manufacturing sectors, which traditionally serve as a vital engine for national growth. Furthermore, the real estate market in the nation’s most populous region has shown signs of distress; home sales in the Greater Toronto Area were reported to have fallen in January by the most significant margin in eleven months, accompanied by a decline in average prices.
The transmission of these economic stressors is being closely monitored as the market prepares for the release of January’s employment data on Friday. While analysts have forecasted a modest gain of 5,000 jobs, the data is viewed more as a “headline risk” than a catalyst for imminent policy shifts. It is widely believed by market participants that the Bank of Canada will maintain its current interest rate levels for at least the next six months. This conviction regarding a static monetary policy has limited the loonie’s ability to compete with the dollar, particularly as the U.S. 10-year Treasury yields remain attractive compared to their Canadian equivalents. The Canadian 10-year yield was observed easing marginally to 3.435%, retreating slightly from a four-week intraday high reached earlier in the week.
The combination of a contracting services sector and a cooling housing market in Toronto has created a difficult environment for the Canadian currency to find support. When these domestic vulnerabilities are coupled with the technical “rebound” of the U.S. dollar, the path of least resistance for the CAD appears to be lower. The impact of trade uncertainty, particularly regarding potential shifts in North American trade policy under the current U.S. administration, remains a persistent overhang that discourages aggressive investment in Canadian assets. As the fiscal quarter progresses, the resilience of the Canadian consumer and the stability of the labor market will be tested by these tightening financial conditions.
Ultimately, the 2026 outlook for the Canadian dollar is being shaped by a transition from speculative optimism to fundamental realism. While the loonie had previously benefited from a “leg down” in the U.S. dollar, that trend is now being reversed by the technical requirements of global currency desks and the divergent economic health of the two neighboring nations. The focus for investors in the coming sessions will remain on whether the 1.37 threshold can be sustained, or if the deepening downturn in the services economy will force a more significant devaluation of the loonie as the Bank of Canada’s “hold” period continues.
